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  1. 1. Women Do Female Executives Drive Start-up Success? at theWheel { {
  2. 2. Executive Summary 3 Methodology 5 VentureSource Database 5 Executive Information 5 Success 5 Industry Breakdown 5 Statistical Methods 5 Venture IndustryFemale Executives 6 Venture Capital Industry Trends 6 Female Executives in Venture-backed Companies8 Exited Venture Companies 10 Proportion of Female Executives by Industry 13 Title Analysis 15 Successful vs. Unsuccessful Companies 18 Dependence Relationship between Proportion of Female Executives and Successful Rate of Company 19 Industry Analysis 22 Successful vs. Unsuccessful by Industry 22 Proportion of Female Executives in Successful Companies by Industry 23 Titles and Successful Companies 25 Female Executives and Predicting the Success of the Start-up 25 Success vs. Failed Companies 27 Industry Analysis 28 Proportion of Female Executives in Failed Companies by Industry 30 Conclusion 32 Appendix 33 contents 1 1.1 1.2 1.3 1.4 1.5 2 2.1 2.1.1 2.1.2 2.2 2.3 3 3.1 3.2 3.2.1 3.2.2 3.3 3.3.1 4 4.1 4.1.1 5 6
  3. 3. WomenattheWheelDofemaleexectivesdrivestart-upsuccess? 3 A Study Authors Jessica Canning, Global Research Director (formerly), Dow Jones VentureSource Maryam Haque, Senior Research Analyst, Dow Jones VentureSource Yimeng Wang, Research Assistant, Dow Jones VentureSource Acknowledgments Guidance given by Prof. Eric A. Suess, California State University, East Bay Editing assistance by Valerie Foo, Senior Research Manager, Dow Jones VentureSource ccording to the 2010 U.S. Census, more adults over the age of 25 than ever before (30%) have college degrees, with more women earning bachelors and advanced degrees than men. While women have outnumbered men in college enrollment since the 1980s and undergraduate degrees earned since 1996, 2010 was the first time women earned more advanced degrees than men. This leaves the open question: Why are women so poorly represented in senior executive roles? This study focuses on the current state of women in U.S. venture- backed companies and how women in leadership roles affect the success of a start-up. To accomplish this, we reviewed more than 15 years of venture-backed company data and executive information in the VentureSource database. In comparing successful versus unsuccessful companies, our analysis unveils: 1.3% of privately held companies have a female founder, 6.5% have a female CEO, and 20% have one or more female C-level executives. The most common positions held by female executives were within SalesMarketing roles, accounting for 27% of the total population sample. The overall median proportion of female executives is 7.1% at successful companies and 3.1% at unsuccessful companies, demonstrating the value that having more females can potentially bring to a management team. By industry, we identify the median proportion of female executives at successful companies as higher than that of unsuccessful companies in the IT, healthcare, consumer services, and business and financial services industries, which are the four largest sectors. We see that a companys odds for success (versus unsuccess) increase with more female executives at the VP and director levels. For start-ups with five or more females, 61% were successful and only 39% failed. summary executive
  4. 4. WomenattheWheelDofemaleexectivesdrivestart-upsuccess? 4 Does having a higher proportion of female executives at a venture-backed start-up improve the companys chances for success? Do Female Executives Drive Start-up Success? women at the wheel
  5. 5. WomenattheWheelDofemaleexectivesdrivestart-upsuccess? 5 1.1VentureSource Database Dow Jones VentureSource has been tracking financing events, people, companies, and investors involved in the venture capital (VC) industry. With more than 25 years of historical data, VentureSource has comprehensive industry statistics dating back to 1987 for the U.S., 2000 for Europe and Israel, 2005 for China, 2007 for India, and 2008 for Canada. Data is collected through a combination of primary and secondary sources with each datapoint thoroughly reviewed under rigorous methodology. 1.2Executive Information VentureSource tracks over 300,000 current and former executives globally. Each person is a senior-level executive with direct decision-making responsibilities for the company or investment firm. For this study, we looked at companies headquartered in the United States but included all executives, regardless of location. The 20,194 VC-backed companies analyzed in this report received an equity financing between 1997 and 2011, or exited between 1997 and 2011. The resulting sample size consisted of 167,556 executives, of which 11,193 were female. Company executives in this study were grouped in the following categories: founder, board member, C-level, VP level, and director. 1.3Success In this study, companies are defined in two ways: Successful is considered: exited through an initial public offering (IPO), is in IPO registration, is privately-held and consistently profitable or has been acquired for an amount greater than its total venture investment (i.e. had an exit ratio greater than one). Unsuccessful companies are divided into two categories: Not Yet Successful are still private and independent but have not yet become successful, as defined above. Failed companies have ceased operations, gone bankrupt, or exited at a valuation below their total venture capital funding. Exit ratios are calculated as exit valuation/total venture investment. Acquisitions with an unknown exit ratio have been excluded from the Successful versus Unsuccessful data set. 1.4Industry Breakdown VentureSource groups companies into the following industries: business and financial services, consumer goods, consumer services, energy and utilities, healthcare, industrial goods and materials, and information technology (IT). 1.5Statistical Methods All of the statistical methods in this report are benchmarked against the 0.05 significance level, meaning our conclusions are claimed with 95% confidence. When we refer to a distribution as normal, we are observing that the distribution is a Gaussian distribution, or bell-shaped curve symmetrical about the mean, which is equal to the median. We applied the Shapiro-Wilk test for normality. When results produce a p-value less than 0.05, the data is considered not normal, and we perform non- parametric tests on the data. For all boxplots, bars at the end of dotted lines represent the lower inner fence and upper inner fence of the dataset, excluding the outliers. The lower inner fence and upper inner fence are calculated as the (First Quartile)-(1.5 x Interquartile Range) and (Third quartile)+(1.5 x Interquartile Range), respectively. The lines, from bottom to top, in the box are the 25th, 50th (median), and 75th percentile marks, respectively. The 25th percentile mark often overlaps with the lower inner fence mark, in which case only the former is labeled in the boxplots. Green dots denote averages. 1 Methodology
  6. 6. WomenattheWheelDofemaleexectivesdrivestart-upsuccess? 6 1997 20052001 20091999 20072003 20111998 20062002 20102000 20082004 U.S. Venture Capital Deal Flow by Industry 1000 0 2000 3000 4000 5000 6000 7000 2 Venture IndustryFemale Executives fig 2-1 1997 20052001 20091999 20072003 20111998 20062002 20102000 20082004 $20 $0 $40 $60 $80 $100 U.S. Venture Capital Investment ($B) fig 2-2 2.1 Venture Capital Industry Trends Historically, IT has dominated venture investment globally. In 2011, there were 3,344 U.S. venture deals that raised $34.14 billion, of which $8.24 billion went to IT. This is a 16% increase in financing over 2010 but still 64% below the peak of the dot-com bubble in 2000. business and financial services consumer goods consumer services energy and utilities healthcare industrial goods and materials information technology NumberofFinancingsAmountInvested($B)
  7. 7. WomenattheWheelDofemaleexectivesdrivestart-upsuccess? 7 U.S. Venture-backed IPOs by Industry and Year of IPO fig 2-3 1997 20052001 20091999 20072003 20111998 20062002 20102000 20082004 50 0 100 150 200 250 300 1997 20052001 20091999 20072003 20111998 20062002 20102000 20082004 100 0 200 300 400 600 500 700 U.S. Venture-backed MergersAcquisitions by Industry and Year of Acquisition fig 2-4 business and financial services consumer goods consumer services energy and utilities healthcare industrial goods and materials information technology There were 568 exits in 2011, an 8% and 19% decline from 2010 and 2000, respectively. IT accounted for nearly 39% of total venture exits in 2011 with 205 acquisitions and 16 IPOs. NumberofMAsNumberofIPOs
  8. 8. WomenattheWheelDofemaleexectivesdrivestart-upsuccess? 8 2.1.1Female Executives in Venture- backed Companies Since 1997, 55% of the pool of 20,194 U.S. VC-backed companies have had at least one female executive. The proportion of female to male executives at these companies is two to nine. (Figure 2-5) Companies are likely to have just one or two female executives (approximately 40% of the sample), compared with five or more male executives (78% of the sample). However, looking at just the number of females does not tell the full story. Analyzing the proportion of females to males and the subgroups of success and industries are where differences between genders are more evident. Number of Companies by Total Number of Males and Females on Management Team fig 2-5 1 Executive 2 Executives 3 Executives 4 Executives 5+ Executives female male 5000 0 10000 15000 20000 5,174 companies have only one female executive 15,608 companies have five or more male executives 1140 2711 1074 1430 1108 809 1147 1069 NumberofCompanies
  9. 9. WomenattheWheelDofemaleexectivesdrivestart-upsuccess? 9 Currently privately-held companies make up 44% of this sample. Nearly half of these 9,978 companies